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Since 1970 the average month return of the FTSE All-Share Index in February has been 1.5%, with the month seeing positive returns in 63% of years.

A glance at the accompanying chart will show quite how strong the market has been in February in recent years. Since 2009 the market had been up every February…until last year, when the index fell 3.8% in the month. From the chart it appears that February has the strange pattern of a run of years where it has positive returns punctuated every eight or so years with a significant fall in the month.

However, notwithstanding that, since 1994 market has only seen significant negative returns in four years. There’s no obvious reason why the market has been so strong in this month; although one possible explication might be that, also in recent years, shares have been weak in January and so they experience a bounce-back rally in February.

The average February

In an average February shares tend to rise strongly on the first trading day, then trade flat for a couple of weeks, before gaining strongly in the middle of the month and finally drifting off slightly to month end.

Large v mid-cap

A feature of February is that, with January, it is the best month for mid-cap stocks relative to the large caps. Since 2000 on average the FTSE 250 Index has out-performed the FTSE 100 Index by 1.6 percentage points in this month, and in that time the large cap index has underperformed mid-caps in February in only four years.

FTSE100 v S&P500

On the international front, February is one of the four months in the year that the FTSE 100 Index has historically out-performed the S&P 500 Index. Since 1999 the UK index has underperformed the US index in February in only four years. Although the out-performance is somewhat attenuated once currency is taken into account as GBPUSD is historically weak in February.

In the last ten years FTSE 350 sectors that tended to be strong in February are: Industrial Engineering, Mining, and Household Goods; weak sectors have been: Mobile Telecommunications, Pharmaceuticals & Biotechnology, and Banks.

It’s a busy month for analysts as there are more FTSE 100 results announced during the month than any other ­ 36 companies announce their prelims in February (as do 55 FTSE 250 companies).

Aside from shares, historically this has been a strong month for gold and silver.

Since 1970 the market has seen positive returns in January in 60% of years and has had an average return of 2.1%. Which sounds pretty good and, indeed, January used to be one of the strongest months for shares in the whole year. From 1984 to 1999 the average FTSE All-Share return in the month was 3.3%, and as can be seen in the accompanying chart in those 16 years the market only fell twice in January. But after year 2000 things changed dramatically.

Since 2000 the average market return in January has been -1.6% with the market seeing positive returns in only six years, and in four years since 2000 the market has fallen more than 5% in the month. This makes January the worst of all months for shares since 2000.

The average January

In an average January shares usually start trading strongly in the first few days ­ most likely a momentum effect from the surge in prices traditionally seen in the last two weeks of the year. However, that ebullience soon wears off and prices then slide for the rest of the month until recovering somewhat in the last few days.

January Effect

In the stock market this month is famous for the imaginatively-titled January Effect. This describes the tendency of small cap stocks to out-perform large caps in the month. This anomaly was first observed in the US, but it applies to the UK market as well. For example, since 1999 the FTSE 250 index out-performed the FTSE 100 Index in January in 68% of years, with an average out-performance of 0.6 percentage points. Although it should be noted that the medium cap index has actually under-performed the large cap index the last two years in 2017 and 2018, leading one to wonder if this phenomenon might be breaking down.

Sectors

The FTSE 350 sectors that tend to be strong in January are: Health Care Equipment & Services, Software & Computer Services, and General Industrials; while the weak sectors have been: Electricity, Food Producers, and Oil & Gas Producers.

Shares

At the company level, FTSE 350 shares that have tended to be strong this month are: JD Sports Fashion [JD.], Paysafe Group [PAYS], Domino’s Pizza Group [DOM], Mitchells & Butlers [MAB], and St James’s Place [STJ]; while the weak shares have been: FirstGroup [FGP], Berkeley Group Holdings (The) [BKG], Paragon Banking Group [PAG], Royal Dutch Shell [RDSB], Dairy Crest Group [DCG].

Aside from equities, January traditionally sees strong silver prices and weak sterling against the dollar.

Since 1970 the FTSE All-Share Index has risen in December in 75% of all years and the average month return has been 2.2%. This makes December the second best month of the year for equity returns after April. But this month scores even better than April with the lowest volatility of any month in the year.

As can be seen in the accompanying chart the market has only fallen in December in six years since 1984. But two of those negative-return Decembers were very recent: in 2014 and 2015. Which might have led one to wonder if the stellar record of December for shares was ending. However, the strength of the market in the month reasserted itself the last two tears when the FTSE All-Share Index rose 4.9% and 4,7% respectively in December.

In fact, as a measure of how strong the market has been in December, one might observe that since the financial crisis in 2007 the FTSE 100 Index has had a return of 19% whereas the index has cumulatively risen in just the months of December 26% since the same date. Forget the Sell In May rule, investors might as well just invested in the month of December and gone away for the whole of the rest of the year – they would have out-performed the market.

The average December

In an average December rather oddly (given the foregoing) shares have in fact tended to be weak in the first couple of weeks of the month, but then around the tenth trading day shares charge upwards. The last two weeks of December is the strongest two-week period of the whole year (and is often referred to as the Santa Rally), and the three days with the highest average daily returns in the year all occur in this two-week period.

While December has been a good month for capital gains, it’s the worst month for income investors with only five FTSE 100 companies paying interim or final dividend payments in the month.

Sectors

The FTSE 350 sectors that have tended to be strong in December are: Electronic & Electrical Equipment, Construction & Materials, and Media; while the weak sectors are: Banks, General Retailers, and Fixed Line Telecommunications.

Diary

Dates to watch this month are: 5 Dec ­ FTSE index quarterly reviews announced, 7 Dec – US Nonfarm payroll report, 19 Dec – FOMC announcement on interest rates, 20 Dec – MPC interest rate announcement, 21 Dec – Triple Witching. And note that the London Stock Exchange will close early at 12h30 on the 24th and will be closed all day on the 25th and 26th.

Since 1990 the FTSE All-Share Index has seen an average return of 0.6% in the month of November; with positive returns in 15 of the last 28 years. This ranks November in the middle of the 12 months for equity performance. However, in recent years the market has been noticeably weak in November ­in the last 12 years the Index has only seen positive returns in the month in four years.

Six month effect

The significant feature of November is that it marks the start of the strong six-month period of the year (November to April ­ an aspect of the Sell in May effect). In other words, investors should be increasing exposure to the market this month (if they haven’t already done so in October).

A feature of November in recent years has been its low volatility, since year 2000 the volatility of shares in November has been the lowest of any month in the year.

The average November

In an average November, the market rises in the first three days, but those gains are then given up in the following few days. In the middle of the month prices increase and then fall back again, before finally rising strongly in the last seven days of the month.

Sectors

In the last ten years the FTSE 350 sectors that have performed strongly in November have been: Food Producers, Aerospace & Defense, and Media. While the weak sectors have been: Oil Equipment, Services & Distribution, Real Estate Investment Trusts, and Industrial Transportation.

Shares

At the company level, FTSE 350 shares that have tended to be strong in November over the past ten years have been: CRH [CRH], Shire [SHP], Britvic [BVIC], Babcock International Group [BAB], and Compass Group [CPG]. FTSE 350 shares that been weak are: Galliford Try [GFRD], Royal Bank of Scotland Group [RBS], Ashmore Group [ASHM], Hochschild Mining [HOC], and Petrofac Ltd [PFC].

Elsewhere, November has tended to be a strong month for gold and weak for the pound against the dollar.

Diary

This is a busy month for interim results: 64 companies from the FTSE 350 make their announcements in November.

October has a bad reputation among investors. Partly justified, one might think: in 1987 the FTSE All-Share Index fell 27% in the one month of October, and then in 2008 the index fell 12% in the month.

However, a glance at the accompanying chart tells a different story. In the 28 years since 1990, the UK stock market has only seen negative returns in October in six years – a record second only to December. And in recent years equities have remained strong in October, only falling in one year since 2010.

Volatility

But, while average equity market returns in October (+1.6% since 1990) may be better than widely believed, the month does have a deserved reputation for volatility. Only September can challenge it for share price fluctuations.

Six month effect

The strength of equities in October may not be unconnected with the fact that the strong six-month period of the year starts at the end of October (part of the Sell in May effect) and investors may be anticipating this by increasing their weighting in equities during October. The last day of the month also tends to be strong, in fact it has the best record of any month’s last trading day – which, again, may be related to the Sell in May effect.

But while October, therefore, should be regarded as a good month for shares, any occasional weakness in the month can be severe.

The average October

In an average month for October the market tends to rise in the first two weeks, then to fall back, before a surge in prices in the last few days of the month (Sell in May effect ­ aka Halloween effect ­ again!)

Shares

In the last ten years, FTSE 350 shares that have the strongest record in October are: BP [BP.], Hargreaves Lansdown [HL.], and Booker Group [BOK. By contrast, weak shares in October over the last ten years have been: Marshalls [MSLH], William Hill [WMH], and UDG Healthcare [UDG].

Sectors

At the sector level, over the last ten years the strong sectors in October have been: Oil & Gas Producers, Beverages, and Real Estate Investment & Services, while the weak sectors have been: Software & Computer Services, Health Care Equipment & Services, and General Industrials

The month is one of only two months (the other is September) that FTSE 100 stocks tend to out-perform the mid-cap FTSE 250 stocks – since 1986 the FTSE 100 Index has on average out-performed the FTSE 250 Index by 0.7 percentage points in October.

After market close on 5 September 2018 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 21 September 2018 and take effect from the start of trading on Monday, 24 September 2018.

September is often not a good month for the stock market. Since 1990 the average return of the FTSE All-Share Index in September has been -1.2%. For some time this record made September the worst month of the year for shares, but this year June has claimed the crown of worst month and September becomes just second-worst. Since year 2000, the Index performance in September has been even worse, with an average return of -1.6% in the month.

However, although the average return is bad in the month, over the longer-term about half of all Septembers actually have positive returns.

The problem is that when the market does fall in this month, the falls can be very large. For example, as can be seen in the accompanying chart, the FTSE All-Share Index has declined over 8% in three years since 2000. So, the big problem for investors in September is volatility – share price volatility is at its highest annual point in September.

Mid-cap stocks

The situation is even worse for mid-cap stocks. Since 2000, on average the FTSE 250 Index under-performs the FTSE 100 Index by 1.4 percentage points in September.

The average September

In an average month for September the market tends to gently drift lower for the first three weeks before rebounding slightly in the final week – although the final trading day (FTD) of the month has historically been one of the weakest FTDs of all months in the year.

In contrast to equities, gold tends to be strong in September: since 1968 the average gold price return in the month has been 1.8%, making September the second strongest month of the year for gold after February.

Sectors

On the sector front, September tends to be good for Tobacco, Nonlife Insurance, and Beverages, and relatively bad for Industrial Transportation, Real Estate Investment Trusts, Electronic & Electrical Equipment.

Companies

FTSE 350 shares that have been relatively strong in September over the last ten years are: JD Sports Fashion [JD.], SuperGroup [SGP], Genus [GNS], Jupiter Fund Management [JUP], and Dechra Pharmaceuticals [DPH]; while share that have been in the month are: Standard Chartered [STAN], BT Group [BT.A], Man Group [EMG], Rio Tinto [RIO], and William Hill [WMH].

Diary

In the diary this month are: the NYSE is closed on the 3rd (Labor Day), the FTSE quarterly index reviews will be announced on the 5th, and the US Nonfarm payroll report is on the 7th.

The UK equity market has displayed a rather odd behavior in August since 2011: alternating mildly positive returns for the month in even years, with large negative returns in odd years. However, that pattern broke down last year, in 2017, when the market had a small positive return (0.7%) in an odd year.

Besides that odd pattern, as can be seen in the chart, apart from the anomalous years of 2008 and 2009, since 2000 even when the market does rise in August, the returns are small.

The average August

From 1970 the average return for August of the FTSE All-Share index has been 0.7%, with 63% of years seeing a positive return in the month. But since 2000 the performance has declined and the average return has fallen to zero. As a result, August now ranks ninth of all months of the year.

Sectors

The strongest sectors in August in the last ten years have been: Oil Equipment Services and Distribution, Gas, Water and Multiutilities, and Software and Computer Services. While the weakest sectors in the month have been: Fixed Line Telecommunications, Mining, and Oil & Gas Producers.

Companies

Over the last ten years the FTSE 350 stocks that have tended to perform well in August have been: Fisher (James) & Sons [FSJ], Petrofac [PFC], and Synthomer [SYNT]. Those first two stocks have seen positive returns in August in nine of the past ten years. By contrast, the FTSE 350 stocks that have tended to perform poorly in the month are: Standard Chartered [STAN], Rio Tinto [RIO], and Vedanta Resources [VED]. Rio Tinto has fallen in every August since 2007.

Diary

Significant dates this month are: the MPC interest rate announcement on the 2nd, US Nonfarm payroll report on the 3rd, the MSCI quarterly index review announcement on the 13th, and the LSE is closed on the 27th (Summer bank holiday).

Since 1970 the FTSE All-Share Index has seen an average return of 0.8% in July, with 54% of years seeing positive returns in this month. This makes July the fifth strongest month of the year for shares. As can be seen in the accompanying chart, in the last nine years the market has only fallen twice in July; so currently July is on a roll.

The average July

In an average July the start of the month tends to be strong ­ the first week of the month is among the top ten strongest weeks in the year. After that, the market has a tendency to drift lower for a couple of weeks until finishing strongly in the final week of the month.

July is one of only three months (the others being September and October) where the FTSE 100 tends to out-perform the mid-cap FTSE 250, although the out-performance in July is not significantly large (an average of 0.1 percentage points since 1986). Better is the performance of the FTSE 100 relative to the S&P 500, in sterling terms July is the second-best month for the FTSE 100 (the UK index has out-performed the US index by an average of 1.0 percentage points since 1984).

Sectors

Historically the sectors that have been strong in July are Banks, Real Estate Investment Trusts, and Software & Computer Services, while weak sectors have been Electricity, Industrial Transportation, and Health Care Equipment & Services.

Companies

On the shares front, companies that have seen strong share performance in July have been: Travis Perkins [TPK], Renishaw [RSW], Morgan Advanced Materials [MGAM], Bodycote [BOY], and Elementis [ELM]. The latter’s shares have only fallen once in July in the past ten years. Companies that have historically performed weakly in July are: TalkTalk Telecom Group [TALK], SSE [SSE], CRH [CRH], Redefine International [RDI], Babcock International Group [BAB]. Shares of SSE have fallen every year in July except one in the past ten years ­ the worst record of any FTSE 350 stock.

Diary

July is a busy month for companies announcing their interim results: 28 FTSE 100 companies will be doing so and 47 FTSE 250 companies.

On the economics front: there is the US Nonfarm payroll report on the 6th, and the two-day FOMC meeting starts on the 31st. The New York Stock Exchange will be closed on 4th July.